The Leader-Member Exchange Theory

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The Leader-Member Exchange Theory, or LMX, is a two-way relationship between management/supervisors and their employees/subordinates. The theory assumes that leaders use different management styles, leadership styles, and behaviors with each individual subordinate or group of subordinates. The exchange between supervisors and subordinates will be inconsistent between each individual member of the group. A supervisor may be very kind and supportive to one employee/group and be very critical and unresponsive to another employee/group. Due to this type of interaction, the LMX theory suggests that leaders classify subordinates into two groups, the in-group members and the out-group members (Gibson, Ivancevich, Donnelly, & Konopaske, 2012, p. 334).
Leaders will often separate in-group and out-group members based on similarities of the group member and the leader. Other characteristics that can play into it are age, gender, or even a member’s personality. A member can be granted in-group status if the leader thinks the member is competent and is going above and beyond to perform the job functions. As mentioned the two groups that members can fall into are in-group and out-group. In-group members are those that share similarities with the leader. Those similarities can be personality, work ethic, common interests, or even alma maters. In-group members often go above and beyond their job description and the leader does more for these members. In-group members will have their opinions and work ideas looked at in higher regard than out-group members. In-group members typically have higher job satisfaction within the group and are less likely to experience turnover. In-group members are often promoted within the organization f...

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... individualized consideration leaders are supportive of the needs of each individual subordinate.
There are also some pros and cons of transformational leadership. Some of the pros are that it is a theory that is researched extensively. It is a theory of leadership that the general public can understand; you don’t have to be an I &O Psychologist or a human resource director to understand the principle of the theory. Some of the cons associated with transformational theory are that it can be difficult to measure the parameters. The four factors discussed earlier overlap in some regards and it can be hard to distinguish them from one another. Some think of the theory as a trait and not a behavior. If an organization is well established and set in their ways, meaning not a lot of change in the organization; then transformational theory may not work very well.
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